On September the 9th SAP and Bosch announced a development in their partnership on the German language version of SAP news. With a simultaneous press release the two corporations appeared to repeat an announcement of 4 years ago in which they said they would be ‘cooperating strategically in order to simplify businesses’.
At first glance this is not a particularly dramatic statement considering simplifying business (and manufacturing) is at the core of their appeal to most of their business customers. Bosch provides physical products that aid in manufacturing and distribution and SAP provides software that allows their manufacturing business customers to analyse the process from end-to-end and maintain and improve on efficiencies where possible.
In September 2016 Bosch announced it would give SAP access to its micro-services within SAP HANA Cloud Platform and SAP intended to add SAP HANA database to Bosch IoT cloud but things are moving much further with this next stage of the partnership.
The news that IgniteSAP is choosing to highlight with this article was, while not hidden, not immediately apparent in the press releases, and several aspects of the statement are of considerable significance for the future development of digital businesses.
It is noted that these are both companies who have been developing products related to the Internet-of-Things in industrial manufacturing applications, but the press release also refers to the creation of a ‘digital industry standard ’ (this is the important part) for ‘the exchange and use of company data along the value-chain’ : an area associated more with SAP.
A Gartner report entitled “Leading the IoT ” defined the Internet-of-Things as: ‘a network of dedicated physical objects (things) that contain embedded technology to communicate and sense or interact with their internal states or the external environment. The connecting of assets, processes and personnel enables the capture of data and events from which a company can learn behaviour and usage, react with preventive action, or augment or transform business processes.’
The principal way in which IoT benefits businesses is to extend the data network used for a centralised planning platform beyond the traditional IT network so that no extra time is spent entering data into the system, but more data points are collected. All IoT data events within the sphere of business activity can be automatically logged and contribute to the wider data network used to drive efficiency.
SAP Leonardo, SAP Edge Services and SAP Cloud Platform are an interlocking trio of commercially available software services which have been developed specifically to leverage the benefits of extending the digital business network to include data generated by end points in physical space.
The Bosch Nexeed Industrial Application system occupies an overlapping area of software development but with a more focus on the digitisation of factory production. The Control Plus application (part of Nexeed Automation) is a solution created by Bosch to “provide an integrated, innovative and sustainable software system for the whole machine life cycle: from machine planning to machine programming, from simulation and engineering to commissioning, from machine control to machine connectivity, from machine delivery to machine operation in production.”
SAP has previously used the IoT to improve efficiency in Italian rail networks in a collaboration with Trenitalia in 2016, in which the feedback of real-time information to a central system allowed for dynamic management and maintenance based on the actual locations of trains, with sensors constantly assessing train status rather than predefined assumptions of maintenance timetabling: leading to improved reliability and reduced running costs.
Another area where SAP (in collaboration with Bosch) has demonstrated the efficacy of IoT is in warehousing and logistics in an innovative approach to warehouse management using Bosch’s Zenoway solution for connecting forklifts and goods. This uses sensors and software to improve internal logistics management and provides faster processing of goods and fewer accidents due to ‘automatic speed control and collision warnings’.
“Zenoway uses smart sensors to monitor and control all a site’s logistics processes. It works by collecting, analysing, and presenting all the relevant vehicle data from connected forklifts, which enables users to monitor goods transport, shorten vehicle routes, and avoid collisions. To ensure in-house logistics run smoothly, Zenoway continuously gathers data and sends it to the Bosch IoT Cloud to be processed. A shared interface with the SAP Vehicle Insights system makes managing even larger forklift fleets easy.”
This wave of simultaneous research and development over recent years, and the ever-increasing availability of these technologies by SAP, Bosch and others is leading inevitably toward a need for interoperability between software and technology solutions.
The latest announcement for Bosch and SAP indicates their readiness after these successful test cases to cooperate in the incorporation of IoT technology into industrial manufacturing, and from that basis establish a synthesis of all aspects of IoT in business. A companion piece published two days later on on SAP News by Christian Klein (SAP SE CEO) referred in particular to the application of these technologies in the automotive industry: which is considered to be the height of industrial manufacturing complexity.
In the German language version of SAP News, the press release that discusses recent developments in SAP and Bosch’s plans contains statements which are worthy of considering in detail as they seem to be indicating, beyond the usual rhetoric contained in such corporate communications, a genuine attempt to change the landscape of manufacturing and the way that wider business activities are run, and incidentally a substantial power play, or staking of a claim, in the strategic economic territory of standardisation.
“The core of the collaboration is the transfer of Bosch business processes to the ERP (Enterprise Resource Planning) software suite SAP S/4HANA”
As part of the new agreement Bosch is going to use SAP S/4HANA. This is a great endorsement of SAP and S/4HANA. It comes at a time when SAP have been experiencing resistance in their customer base to the implementation of S/4HANA, which is more than just an upgrade and consequently is considered a big step to take, with many preferring to delay and continue using SAP R/3. If a large company like Bosch is seen to be choosing S/4HANA for their own business processes (‘for planning, controlling and managing resources from order entry through production and delivery to invoice processing’ )then this may well reassure those others who are holding back, and persuade them that the consensus is changing and they won’t want to be left behind. This also presumably comes with the added benefit for SAP of substantial remuneration for the contract of implementing S/4HANA on a scale as large as Bosch, who have 32,800 employees and 402,000 ‘associates’ according to Forbes. There will also be a knock on effect as Bosch customers on other systems are encouraged to buy into SAP products in order to achieve full compatibility with Bosch software and services.
“Together we pursue the goal to digitally map this expertise on the basis of SAP S/4HANA – and thus define a uniform industry standard”
If ‘uniform industry standard’ refers to actual, legal industry standards (where a product must fulfil particular criteria) rather than a more general description of ‘the best’ then this statement by Christian Klein (SAP CEO) is describing an intention by SAP and Bosch to make the power play we referred to earlier.
There are already world standards defined by ISO (International Standards Organisation) and European standards defined by the EU regarding the Internet-of-Things but these are not corporations. If a corporation defines a standard regarding IoT before other legal entities such as ISO or the EU, the company can potentially copyright and protect this as intellectual property. If such standards are already pre-defined by these legal authorities then any standardisation carried out by SAP and Bosch will be ‘nested’ within these pre-existing limitations, but given the newness of the technology there is a lot of conceptual territory to claim. If they are successful in this endeavour the any businesses in the future requiring the use of copyrighted or patented technology will find it necessary to licence SAP and Bosch products to comply with these global standards themselves. If the software that is used to comply with the industry standard is based on the structure of S/4HANA, this could severely comprise SAP’s competitors.
As part of what might be seen as an extended public engagement and community relations campaign Bosch has initiated an open-source machine (programming) language already called Production Performance Management Protocol geared toward making the IoT more readily available for small and medium sized enterprises. At the time CEO Volkmar Denner said “Open standards are one of the fundamental prerequisites for making use of the opportunities Industry 4.0 presents. By letting everyone participate in data exchange, they increase interoperability, enable new business models, and enhance the competitiveness of all the companies involved ”. While this protocol is available free of charge, this is a Bosch initiative and not an SAP driven project and is really a very small piece of the territory we are considering here. It may be that in the future, as part of ongoing negotiations with other stakeholders in industry and international standards organisations that many more open-source alternatives become available for small and medium size enterprises but this does not preclude the emergence of a dominant commercial standard.
There are also many other open-source standards designed to fulfil other criteria and niches within the wide area of IoT such as those developed by the Open Connectivity Foundation, Iotivity, Infocomm Development Authority of Singapore, Eclipse IoT and Google.
It may be best to give an example of the emergence of global ‘standards’ (not legal ones) that everyone will recognise. These are technological solutions that developed to fulfil a wide variety of functions, and became so dominant that they effectively ‘became the standard’ while not explicitly the subject of an international standardisation process, other than normal corporate copyrighting and patenting.
Operating systems for personal computers centred around two key commercial players (Microsoft and Apple) for several decades while the open-source operating system Linux (among others) was developed as an alternative. Linux is widely adopted but has never challenged the dominance of the two main competitors. Their primacy was only challenged by a paradigm shift where most of the functions facilitated by personal computers came to be offered by tablet computers and mobile phones with IOS and Android applications, to the extent that many people decided they did not need a personal computer.
There are complex social/technical dynamics at play here. Just as with an emerging market, emerging technology appears to require several competitors to develop several alternatives which expand through competition and cross-fertilisation of each other and then contract into a synthesis of the whole, from the basis of which further iterations of the development of the technology arise to again complete and evolve at a new level. The existence of outlying open-source alternatives contributes to this process in part due to the lack of commercial constrictions like the need to generate profits and so is good for the ecology as a whole, but without profit there is an inherent lack of motivation for investment to compete on the commercial level. It is a testament to the foresight of the ISO and EU that they see the importance for society and the business community to create a system of checks and balances in the area of IoT but it is also inevitable that the impetus for evolution will come from large corporations like SAP and Bosch.
There is also a more general benefit to the two companies if they define the language (in both a linguistic and programming sense) used to describe IoT technology and processes, in the form of increased public awareness of their products, as with the conflation of the vacuum cleaner (as a category of domestic appliance) with the brand ‘Hoover’, or alternatively, in the case of the structural and formal coding protocols (like PPMP) required to facilitate integration of products into the worldwide Internet-of-Things.
“With its deep expertise in various business areas and processes, Bosch will influence the further development of SAP S/4HANA”
Bosch customers are currently able to access SAP HANA in Bosch IoT Cloud. The degree to which Bosch will influence the further development of S/4HANA is not clear. We must assume this will be in the form of consultation on integration of software and ‘end-points’ (that is physical products such as sensors) in manufacturing, as this is an area of specific interest for Bosch research and development.
What is important from a strategic point of view is that this demonstrates a high level of commitment on behalf of the two organisations to the collaboration, as the results of such a collaboration will lock both groups into using each other’s systems to begin with and then into a composite, or synthesis of their respective technologies going forward.
“The aim of the standardisation and automation of the processes is a decisive simplification of the global system landscape, a continuous optimisation of the processes and an even more secure handling of real-time analyses.”
Here again we have a reference to ‘standardisation’, which we have explained may be interpreted either as indicating standardisation of internal processes and definitions between the two companies or in an over-arching way across the whole of industry, within the limitations of the ISO and EU standards already in existence. The following use of the phrase ‘global system landscape’ implies the latter.
If Bosch and SAP are intending to define the architecture and vocabulary of a global system this will have a profound effect on the market share of other companies over the course of decades as professional IT consultants will seek to become proficient in the dominant system: causing a feedback effect as they will be keen to recommend that their clients implement this system over it’s competitors and further increasing the market share of the dominant system again as a result.
The issue of protecting corporate and private data within data networks is substantial and the Internet-of-Things, with its extension of data capture, will increase the necessity for negotiation of standards, not just between SAP and Bosch but also within the wider circles of German, EU and international law. By getting in on the ground SAP and Bosch are apparently hoping to avoid potential legal issues later on, or to at least steer the debate to their advantage.
These aspirations of SAP and Bosch may well lead the conversation on the development of international standards and legal compliance within the realm of the IoT and consequently these corporate giants may find themselves in a position to stake a claim to the lion’s share of the new market territory.